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The Economist on “Non-Profit Capitalism”: What It Implies for Mozilla

Wending my way through this week’s Economist, I came across an article about “non-profit capitalism”. (Get it while it’s hot, it’ll probably end up behind a pay wall soon enough.) Specifically, the article describes the recent IPO filing of a non-profit organization called Do Something:

This imitation of the for-profit IPO process may seem gimmicky, but in fact it is part of a new trend to improve how non-profits are financed, so that they can escape the obsession with short-term fund-raising that is pervasive in the charitable world. With money in the bank to finance the next three years’ operations, Ms Lublin and her team will be free to focus on reaching Do Something’s goals.

Now I’ve savaged the idea of a Mozilla IPO in the past as demonstrating a “total lack of understanding of the Mozilla community ethos.” The Do Something IPO is different, however, since it does not provide investors with any voting rights. An IPO of this sort would therefore provide Mozilla with additional funds without hampering its ability to pursue its altruistic goals.

Mozilla is unlike most non-profits, of course, because it generates significant revenues. At the same time, income is still paltry compared to the financial resources of its competitors (with the recent entry of Google into the browser space only serving to drive this point home more forcefully). An IPO-like event might make sense if a) it brings in a significant amount of capital relative to current revenues and b) that capital can be deployed effectively to increase Mozilla’s competitiveness.

Both are big ifs. If we assume that Mozilla can achieve turnover of around $100 million annually (not that much of a stretch considering that 2006 revenues were $66 million), the amount raised in an IPO would probably have to be in the order of hundreds of millions to make any real long-term difference. Would Mozilla be willing to float enough of its equity to achieve this, considering that the implied market capitalisation would reflect the fact that “investment” in the company would actually amount to a charitable donation in the absence of voting rights?

Besides which, we all know that throwing more money at a software development project or projects doesn’t necessarily lead to increased productivity. Access to, say, twice its current financial resources certainly wouldn’t make Mozilla’s products twice as good or half their time to market. Then again, managed correctly this extra money could have a real effect on Mozilla’s competitiveness.

A Mozilla IPO still seems highly improbable, even if structured in this way, but the idea and the questions it raises are certainly intriguing.